All right, it is undeniably a healthy growth. But relative to GDP, isn't this still abysmally low?

At a tad over a trillion dollars, ours is the fourth largest economy in the world today, and the GDP has been clipping at close to nine percent growth for some years now. Even today—as we read more and more about lower IIP growth and the crashing stock markets on the one hand and an impending recession in the world’s largest economy—judging by an opinion poll among 60 top marketers in Mumbai, New Delhi, Bangalore and Chennai, businesses have no fear whatsoever of any ripple effect on our economy from any of these concerns. These marketers are distinctly bullish about consumer sentiments on one hand and their own corporate prospects on the other. The survey, conducted by Synovate for this magazine, shows that as many as 88 percent of the marketers polled, spread across the consumer goods, automotive, banking and finance, and telecom sectors, are sanguine that consumer spending will be better than last year. Over 70 percent of them actually want to ramp up marketing and advertising spends by around 20 percent or more during the year.

Yet, what percentage of this record GDP growth has gone cumulatively into advertising? Minuscule at the most. In 2004, when our GDP was $651 billion, and growing at eight percent, the ad industry, grew by 11 percent but still constituted just about 0.4 percent of the GDP, at a tad over Rs 10,000 crore. Since then the GDP has been growing faster and faster, year after year. The GDP growth was at 9.7 percent past fiscal and the ad spend growth was 22 percent. But the picture is not so rosy when you consider that there has been no cumulative growth in the ad spend—as a percentage of GDP it still hovers around the same 0.4 percent!

Sadder still, among the top ten Asian markets, ours is the lowest. In the tiny Hong Kong, it is a humongous 3.5 percent of its GDP; in the Philippines it's 2.4 percent, in Singapore it's 2 percent of its GDP, in China it's 1.9 percent, in Japan it's 1.2 percent, and it's 1.1 percent of the Korean GDP. And look again at our paltry 0.4 percent and think of a single percentage point increase in the ad

Compared to other Asian markets, our advertising is clearly under-powered. Even so, we also need to ask, do these stats about our advertising spend relative to the GDP fit the ground reality? Let's do a quick calculation of how advertising monies are being deployed in our country.

Shifts in the media mix are being speeded up, especially by the explosive growth in the retail space which is growing at 30-35 percent annually. Growth in retail media spends, according to some of the nearly dozen big players surveyed, is soaring at 50 percent or more. Whatever the precise figure, competition is forcing marketers to engage more closely with retail consumers into a more personalised, mutually loyal connecting, to both acquire and retain customers. As both branding and selling tactics proliferate, marketing communications encompass much other activity besides the mainstream advertising media spend vis-a-vis our trillion dollar GDP would be around $10 billion, which is more than double the current size.

No doubt cost-effective media planning and budget management yield economies of scale to individual marketers.

By the same token, they encourage larger spending by the industry as a whole. Whatever the macro stats may show, we can see what is happening before our eyes.

Besides ad budgets, the array of below-the-line brand building tools is steadily widening: public relations and customer retention programmes, road-shows and events, telemarketing and door-to-door marketing, the fledgling but booming modern retail media and the other ambient media formats, in-film branding, and now Web 2.0 media.
Direct marketing mop-ups around Rs 250 crore in agency billing, which almost all DM players claim to be doubling every year. Since the agency take is typically around 2.5 percent of the total spends, that is a lot of money going into direct marketing. Online marketing, though hobbled by insufficient Internet connectivity, has already begun to take away advertising rupees in a major way.

As for public relations, a back-of-the-envelope calculation pegs the size of this segment at around Rs 300 crore. But as there are no conventional billing parameters in this business, much of it is on a catch-as-catch-can basis. It is still ‘churning’ as growth is hard to quantify, but there is no doubt that it is growing.

Finally, there is the new battleground for marketers: the rural India. Long under-served, it’s now caught the imagination of some really big corporates with deep pockets. No doubt, distribution and inventory management take up most of their investments in rural retail, but trade can hardly happen without ground level activation of consumers in our vast heartland. And that is visibly growing. Marketers are taking to the new media formats, made increasingly available by technology and infrastructure, in unprecedented numbers. All this costs good money; so spends must be substantial. That's the upside for the industry. But howcome they don't show up? Sadly, that is the downside.

The way I see it, there are two inter-related reasons for this. One is that marketing communication expenses are not wholly shown clearly in the books. Marketers under-report brand promotion and marketing expenses. This is not a great discovery of mine: it's nothing new to Indian businesses too. My point is that it can't go on indefinitely. It imposes an artificial obstacle to clear-headed planning, and complicates the logistics. If marketers are to stay focused on their objectives, in an increasingly competitive marketplace, they need to operate with as much transparency as possible.

The other is the cause is an obnoxious taxation regime the finance minister slapped on corporate India in the 2006 budget under the name of fringe benefit tax. This tax is both discriminatory and unfair. Discriminatory, in that it does not extend to online advertising—the large and fast growing revenues that search advertising is generating, for instance, for Google, is not deemed to be advertising. Unfair, in that it extends its purview, among other expenses, to those on sales promotions. (Originally even advertising expenses were included, but dropped after many representations). It is obnoxious, because it taxes a company on legitimate and unavoidable business expenses, such as sales promotions, business travel, use of telephones, etc, which are by no means fringe benefits to any employee.

Companies as a rule don't condone wastage of resources: given the unexpected twists and turns of globalisation, they need to save whatever they can. False reporting of expenses does happen, but hardly enough to penalise the whole corporate sector. Nor do employees, as a rule, make monetary gains from business trips. In fact, business trips disrupt their as well as their family lives. And our government want us to pay tax for that suffering.

At this point, I have two heart-felt wishes for the advertising industry. One is that it will realise its full potential for growth. The other is that the finance minister will facilitate this process by dropping this thoroughly dispensable levy called the fringe benefit tax from the Statute Books come February 29.